NIIT: Focus on margins - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

NIIT: Focus on margins

Jan 22, 2001

NIIT, a leading education and software major, recorded a jump of more than 50% in revenues for the year ended September 2000. This was despite slower growth in its education business. The changing business model of the company from education (contributes 51%) to software (49%) resulted in substantial improvement in margins. The company is rapidly transitioning itself to an e-business solution provider with e-revenues contributing 41% to global revenues. It also has well diversified geographic mix of software revenues wherein it gets 34% of sales from the US followed by 18% from Europe, 26% from Asia Pacific and balance from India.

NIIT has divided its business into independent business unit namely education & training, projects, software solutions and knowledge solutions. This is expected to help the company in achieving its target of Rs 100 bn revenues by 2006.

Quarterly Overview
(Rs m) First Quarter  
Year end September 30 FY01 FY02E Change
Sales 1,231 1,724 40.0%
Total Income 1,260 1,804 43.2%
Operating Profit 282 451 59.8%
Interest - -  
Depreciation 77 80 4.2%
Profit Before Tax 205 371 80.6%
Tax 20 20 0.0%
Net Profit 185 351 89.3%
No. of shares (m) 38.7 38.7  

Key Ratios
Particulars 1QFY01 1QFY02E
OPM 20.6% 21.5%
Tax/PBT 9.7% 5.4%
NPM 15.0% 20.3%
Cash EPS* 27.12 44.57
EPS* 19.17 36.29
* annualised    

NIIT is expected to record a topline growth of over 40% during the first quarter ended December 2000, led by its aggressive investments in sales and marketing. The company’s efforts have generated large order intakes in the past three months. It has recently received an order worth $31.7 m from Karnataka state for five years. Accordingly, NIIT will set up infrastructure for computer classrooms in 700 schools using latest software and networking technology.

In a move to improve the operating margins, software development centers of the company located at Delhi are working in double shifts. These development centers account for around 60% of its total offshore development capacity. All these factors will fuel bottomline growth, which is expected to be in the vicinity of 90%.

At the current market price of Rs 1,760 NIIT is trading at a P/E multiple of 23 times its September 2001 projected earnings. The company’s current valuations are lower as compared to its peers in the industry. In the coming years, if NIIT is successful in moving up the software value chain, it could trigger a re-rating in the stock.

Comparative Valuations
Particulars NIIT Infosys Satyam Wipro
Price (Rs) 1,760 6,779 418 2,914
P/E (x) * 23.0 77.0 46.4 124.0
* on one year projected earnings

Equitymaster requests your view! Post a comment on "NIIT: Focus on margins ". Click here!

  

More Views on News

NIIT 2020-21 Annual Report Analysis (Annual Result Update)

Nov 8, 2021 | Updated on Nov 8, 2021

Here's an analysis of the annual report of NIIT for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of NIIT. Also includes updates on the valuation of NIIT.

If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today (Views On News)

Nov 30, 2021

Did TCS perform better than the market and its peers?

India's Top 4 IT Companies are Struggling. Here's Why... (Views On News)

Oct 22, 2021

As attrition rates are unbelievably high, top Indian IT companies are going for big-ticket raises, and much more hiring this year.

Infosys had an Exceptional Quarter Buoyed by Huge Deal Wins. Revenue Guidance Boosts Stock (Views On News)

Oct 14, 2021

Infosys raised its forecast for annual revenue growth to 16.5-17.5% from the earlier 14-16%, predicted in July 2021.

Info Edge: The Anatomy of an Indian Internet Behemoth (Views On News)

Oct 2, 2021

Info Edge is very popular in the Indian startup ecosystem due to its active participation in funding events.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

NIIT SHARE PRICE


Dec 9, 2021 (Close)

TRACK NIIT

COMPARE NIIT WITH

MARKET STATS